Schroders Global Investor Study 2020: Hong Kong investors still targeting investment returns above 10% despite Covid-19 shock
Hong Kong investors are optimistically expecting average annual total returns of 10.3% over the next five years, despite the uncertainty caused by Covid-19, Schroders Global Investor Study 2020* has found.
While this is lower than Asian investors’ expected average returns of 11.5% annually over the same period, only 5% of Hong Kong investors expect the negative economic impact caused by Covid-19 to reverberate for more than four years. In fact, a majority of Hong Kong investors (69%) expect the ramifications to last between six months to two years, according to the study which has encompassed more than 23,000 investors globally, including 500 of them from Hong Kong.
This may explain why Hong Kong investors have only slightly lowered their short-term income expectations, with 8.1% expected to be achieved over the coming 12 months, compared with 8.8% a year ago.
The impact of the global pandemic nonetheless caused many Hong Kong investors (85%) to make substantial changes to their investment portfolios, with 81% altering the risk level of their investments. Among these investors, 32% confirmed they took the opportunity to move some or a significant proportion of their portfolio to high-risk investments, while 58% of investors moved some or a significant proportion of their portfolio to lower risk investments.
Interestingly, Hong Kong’s Generation X1 appeared to be more willing to brave the market volatility caused by Covid-19. Compared to the proportion in other generations, 23% of Generation X stated that they have moved a significant proportion of their portfolio to high-risk investments. This compared to just 10% and 11% among millennials2 and baby-boomers3 respectively.
Amy Cho, Chief Executive Officer, Hong Kong and Head of Intermediary, Asia Pacific, Schroders, commented:
“The ongoing Covid-19 pandemic and its local resurgence have undoubtedly brought unprecedented challenges to investors. Many regard this as the ultimate black swan event, as evident by the big swings in markets over the past months. Coupled with the prolonged low interest rate environment, we believe investors would likely need to take on higher risk assets to generate the return they need to fulfil their investment goals, and be more agile in managing risks. These are easier said than done given the skill set necessary, investors could consider adopting actively managed multi-asset portfolios and take the opportunity to pick up the experience of investing in a broader range of asset types.”
The Covid-19 crisis has also triggered more focus on savings, with 34% of investors stating they now think about their investments at least once a week, compared with 19% before the pandemic.
Close to two-thirds of people (60%) who describe themselves as having an ‘advanced’ or ‘expert’ level of investment knowledge, state that their level of worry if their investments drop for a short period of time is non-existent, highlighting their higher risk tolerance during periods of uncertainty.
It is also worth noting that 48% of the surveyed Hong Kong investors stated that the authorities should be responsible for ensuring their knowledge of financial matters is sufficient. In reality, only 36% of investors said they acquired their financial knowledge from this source.
Meanwhile, 59% of the respondents recognised the importance of financial self-awareness, with 63% said they were doing research on their own to acquire financial knowledge.
Amy Cho added: “Schroders has always played an active role in supporting the financial literacy of the Hong Kong community. As a supporter of the city’s Investor and Financial Education Council4, we are proud to be awarded ‘Financial Education Champion’5. By leveraging best practices and our professional investment insights, we aim to raise Hong Kong investors’ financial knowledge, and empower them to make the most suitable investment decisions that can help achieve their long-term goals.”
To find out more about Schroders Global Investor Study 2020, please click here.
1 People aged 38-50
2 People aged 18-37
3 People aged 51-70
4 Investor and Financial Education Council, Supporting Organisations of the Financial Literacy Strategy
5 Financial Education Champion 2020
*In April 2020, Schroders commissioned an independent online survey of over 23,000 people who invest from 32 locations around the globe. This spanned countries across Europe, Asia, the Americas and more. This research defines people as those who will be investing at least €10,000 (or the equivalent) in the next 12 months and who have made changes to their investments within the last 10 years.
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